First, notice the red range (wedge) pattern in price – the lower boundary is the 2,100 level while the upper high is the current 2,130 level.

The small candles at the highs – with declining volume – suggest a higher probability from classical technical analysis of a return back to the lower side of the trendline near 2,100.

With that in mind, our alternate and thus “Breakout into Short-Squeeze” Rally thesis will trigger as bulls convert bears into buyers (to cover losses) on an impulse through 2,130.

Reference February 2015 for a similar example of the “two days down into resistance” then almost 10 days in a row to the upside outcome that surprised short-sellers and thrust the market instantly to new highs.

We MUST take that into account when planning the current outcome – price could power-rally straight up again.

Here’s a zoomed-in perspective of those events:

January 2015 saw a sideways triangle/rectangle consolidation give way to a short-squeezed breakout all the way from 2,060 to 2,120 in February.

Compare that formation earlier in the year with the present consolidation and plan your trading strategies accordingly.

One Response to “Still Planning a Breakout or Reversal in the SP500 Wedge”

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